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Identifying and Overcoming this Modern-Day Epidemic
Fraud, waste and abuse have significant social and economic impacts on the business of government. Governments are paying a hefty price in the face of fraud—in terms of reduced funding for programs or increased public debt—but citizens are also feeling the effects. The denial of essential services and reduction in available funding to citizens is a direct result of fraud. This impact is indelible during these difficult economic times when citizens need help more than ever. Not only do citizens lose access to benefits and services because of fraud—they lose their faith in government.
According to Accenture research, government response to fraud continues to evolve. Across the world, governments are introducing new laws and regulations to combat fraud and error in social sector spending programs. These include setting up new bodies to oversee anti-fraud activities and also laying down guidelines for a fraud control program within agencies. Forward-thinking agencies can learn from these leading practices and begin to implement frameworks and governance structures to fortify the agency against this modern-day epidemic.
In this executive report, Accenture outlines how agencies are making strides in combating fraud, and proposes a framework to help address financial leakages in social services institutions and pensions organizations.
Read the full PDF to learn the recommendations and key findings from the research. [PDF, 54KB]
Financial leakages in the social services and pension systems worldwide manifest themselves in a variety of ways— fraud, waste and abuse at one end of the spectrum, to overpayment and errors occurring as part of day-to-day processing.
The challenges of today’s economy are fueling the problem. Rising demand for social services, coupled with increasing complexity of schemes, and greater use of online and self-service channels, drive up new opportunities for error, mistakes and abuse.
Fraud is hurting social services agencies and pensions organizations—from weakening an already fragile bottom line, to robbing citizens of the services they are eligible for. Fraud, waste and abuse also extend across geographies, however, only a limited number of countries are examining the financial leakage and comprehensively reporting on it. However, according to Accenture research, the fraud picture worldwide is a bleak one. For example, in the United Kingdom, the National Fraud Authority estimates that £21 billion ($33B USD) is lost to fraud in the public sector each year. Overpayments in Ireland increased by 65 percent in just three years. And in the United States, improper payments by government agencies reached $125 billion in FY10.
The public sector is widely perceived to be prone to fraud, waste and abuse given the large program outlays (e.g. the large sums of money associated with revenue and benefit payments) and apparent weaknesses of oversight mechanisms or internal controls. With such large amounts of money at stake, the negative impacts reach deep and are widespread.
Fraud infiltrates the system in a variety of ways. According to Accenture research, the most common areas of weakness are overpayments/improper payments and healthcare programs.
Overpayments due to either employee error or fraud are a major concern for nearly all of the countries examined in Accenture’s research. The problem is an apparent one. For example, in Ireland, overpayments increased from €50.5 million ($68.5 million) in 2007 to €83.4 million ($113.1 million) in 2010 (an increase of 65 percent). In the US, overpayments by government agencies continue to increase. Numbers reached $125 billion in FY10.
Two primary issues are at the root of overpayments. The first is the frequent reliance on the customer to provide data and information that is then used in calculating their benefits. This “self-certifying” of data can lead to customers making small changes and misrepresenting their situation in the knowledge that this will provide a higher amount of benefit. The second is the complexity of the benefit systems themselves, which leads to unforeseen errors being made either by citizens or government staff as they process claims.
Healthcare programs appear to be more vulnerable to fraud than other government social sector spending schemes. Given the magnitude of government expenditure for healthcare, the level of fraud is significant. For example, in North America, it is estimated that 2 to 10 percent of healthcare spend is lost due to fraud. Estimates by government and law enforcement agencies such as the FBI place the loss due to healthcare fraud as high as 10 percent of annual healthcare expenditure (around $226 billion).
Accenture recommends taking an end-to-end approach to embedding intelligent processing to address compliance issues. By moving the bulk of identification activities upfront and into the core processing areas, agencies move beyond detecting and correcting non-compliance after benefits have been paid, to preventing it from happening.
This approach helps agencies change their processes to:
Human services agencies can reap quantifiable value from such an approach. Benefits of better targeting include:
While agencies are making inroads to fight fraud, fraud is complex and changing every day. Agencies must be flexible in adapting the process over time to accommodate new and evolving threats. There is no one-size-fits-all or “right the first time” solution. However, by engaging the right stakeholders within the organization and building a collaborative governance structure that evolves over time, the agency will have the necessary tools to fight back.
October 30, 2013
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